Companies place a great emphasis on creating and maintaining customer loyalty. To this end, they use a variety of means to encourage loyalty. It is a known fact that customer retention is more important and more cost-effective than customer development. Loyalty is a positive belief in the value that a company provides, leading to increased purchases over time. Customer loyalty is described as the strength of the relationship between an individual’s relative attitudes and repeat patronage .According to Customer Loyalty Research Center , loyalty is “the commitment of customer to a particular brand or company”.
Loyalty programs have become one of the most critical means by which companies manage their customer relationships
Time constraint: cross sectional: collection of info only once
how we dev qtns from lit rev
Behavioral models are purely historical and deterministic. They shed no understanding on the reasons for the observed behavior; they simply produce probabilities for future purchases based on what has been recorded in the past.
Attitudes towards the brand and company image also affect the customer mind to build relationships with the company.
When consumer preferences are not well defined, they may be constructed based on the influence of some contingency factors. Three types of contingency variables are specified: consumer circumstances (budget, time constraints, need for novelty, tolerance for risk, need for social approval,etc.);consumer characteristics(such as habit, desire for variety, tolerance of risk and need to conform);and purchase situation effects (including product availability, promotions/deals, the use occasions). These models help determine extent of loyalty of a particular consumer by observing historical behaviour, studying his attitudes and by analyzing contingency factors.
Market Research Project on Retail Loyalty Cards
Customer’s Perception Of Multi-Brand Retail (Apparel) Loyalty Card FORE School of Management
PLAN OF ACTION1. Introduction2. Literature Review3. Approach Diagram4. Problem Statement5. Hypothesis6. Research Methodology7. Analysis8. Findings and Conclusion9. Recommendation10. Limitations11. Bibliography
LOYALTY“A deeply held commitment to re-buy or re-patronize apreferred product/service consistently in the future, therebycausing repetitive behavior reflecting purchase of the branddespite situational influences and marketing efforts having thepotential to cause a switching behavior.” --Keiningham,T.L.,Vavra,T.G.,Aksoy,L. & Wallard.H. ” Loyalty Myths John ” Wiley & Sons Inc, 2006 edition.
Measuring and changing purchase behavior is a criticalcomponent of loyalty programs, so it’s obvious thattracking that purchase behavior is paramount.
Customer retention is more important and morecost-effective than customer development
Loyalty programs/cards have become one of the mostcritical means by which companies manage theircustomer relationships
Do these loyalty programs really work?Do customers choose to go to a specific store due to theloyalty cards they have or are there more pressingreasons for preferring that store?How do customers perceive these loyalty cards?Can a loyalty program change how customers behaveand get them to spend more money with a specificretailer?Does loyalty card usage and store loyalty go hand inhand ?
Real brand loyalty results from an emotional bond createdby trust, dialogue, frequency, ease of use and a sense ofvalue and added satisfaction. Loyalty is the reflection of acustomer’s subconscious emotional and psychologicalneed to find a constant source of value, satisfaction andidentity -- Jenkinson, A. (1995), “Retailing and shopping on theInternet”, International Journal of Retail and DistributionManagement, 24, (3), pp.26-37
There is a range of conceptualizations as to what constitutesloyalty. These range from repeat purchases to a lifetime .Thedifferent types of loyalty could be: No loyalty, spuriousloyalty, latent loyalty, and sustainable loyalty. Loyaltyschemes can only offer value as part of a coherent valueproposition in the context of sustainable loyalty; a key role isin converting spurious loyalty, in which relative attitude is lowand patronage behavior high repeat, to sustainable loyalty.This involves converting convenience–based loyalty tocommitment, and reduces the customer’s inclination to defect. --Dick A. and Basu K., Customer Loyalty: Toward and Integrated Conceptual Framework,Journal of the Academy of Marketing Science, vol. 22, Spring 1994, pp. 99-113
A recent contribution from Huddleston et al. (2004) confirms thatfood store customers exhibited spurious loyalty, i.e. high repeatpatronage, but low relative attitude towards preferred stores, whichwould suggest a role for loyalty schemes. --Huddleston, P., Whipple, J. and van Auken, A. (2004), “Foodstore loyalty: application of a consumer loyalty framework”, Journal ofTargeting,Measurement and Analysis for Marketing, 12, (3), pp.213-230Whyte (2004), on the other hand, suggests that loyalty programmesmay only create spurious loyalty, and may not be very successful intranslating such loyalty to commitment. They suggest that frequentflyer programmes in Australia create spurious loyalty, and thatrepeat purchase is not a proxy for customer satisfaction orcommitment. --Whyte, R. (2004), “Frequent flyer programmes: is it arelationship, or do the schemes create spurious loyalty?”, Journal of Targeting, Measurementand Analysis for Marketing, 12, (3), pp.269-280
There are two important attitude-type constructs.• The first is affective commitment (Morgan and Hunt 1994; Verhoef 2003), or the factors that create stickiness in a relationship. This commitment is affected directly by the degree of personal interaction between a customer and a company and how the company manages the customer’s account over time (Bendapudi and Leone 2002).• The second is brand equity, which is influenced by factors such as repeated performance and satisfaction (Keller 1993; Selnes 1993), word of mouth or the “buzz” about the brand (Rosen 2000), the degree of identification with the brand, and its relevance to a customer’s situation (Aaker 2004; Keller 2003). As the market grows and customer experience accumulates, more affective attitudes toward the relationship and brand come to drive intentions. With respect to relationship commitment, the implication is that the personal relationship between a customer and a company should be measured, nurtured, and managed effectively (Bendapudi and Leone 2002) through a company’s customer relationship management system. For brand equity, the implication is that the degree to which customers identify with a particular brand and find it relevant to their situation should also be measured and managed effectively.
CUSTOMER STORE LOYALTY Variety of Quality of products product Transportation Ease of product convenience return STORE LOYALTY CARD Store’s Helpful sales attractive peopleinterior design Notify Accumulate cardholders points and about redeem it at a upcoming later stage promotions/dis Special Cash back counts discount on facility cardholders special days
OBJECTIVETo determine the Customer’sPerception Of Multi-brandRetail(Apparel) Loyalty Card
HYPOTHESIS1. Loyalty card possession for males is not different from females.2. Family income does not affect the number of loyalty cards a person has.3. People who have higher number of loyalty cards, rate importance of loyalty cards same as people with lesser number of cards
Three basic approaches that have evolved to conceptualizeloyalty: a behavioral (purchase) approach, an attitudinal(feelings) approach, and a hybrid approach incorporatingconsumer characteristics and purchase situation
The Behavioral Model of LoyaltyHistorical purchasing Satisfactory of brand and experiences competitors (reinforcement) Behavioral LoyaltyLoyalty mainly expressed in terms of Revealed behavior
The Attitudinal Model of Loyalty Social factors,Attitudes and beliefs influence ofToward The brand or significant others company and community Attitudinal Loyalty Loyalty as an attitude that sometimes leads to an ongoing relationship with a brand
The Situational Model of Loyalty Consumer’s Situation and usage characteristics and occasion desire for variety Co- determinants of ChoiceLoyalty as behavior moderated by the customer’scharacteristics, circumstances, and/ or the purchase situation.
Summary of Results Hypothesis P value DecisionLoyalty card possession formales is not different from .304 Acceptfemales.Family income does not affectthe number of loyalty cards a .479 Acceptperson has.People who have highernumber of loyalty cards, rateimportance of loyalty cards .744 Acceptsame as people with lessernumber of cards
Factors like• quality and variety of products that the store offers weigh at the top while• helpful salesperson,• ease of product return• Store’s attractive interiors and• transportation convenience are the other crucial factors towards the determination of a store’s loyalty.Amongst all the important factors that determinea store’s loyalty, holding the loyalty card of a storeis the least important factor towardsdetermination of store loyalty.
Although companies are able to gather some very usefulinformation about their consumers and they benefitfrom this accumulated knowledge as they developmarketing strategies. By doing so, companies are able tosegment their markets more effectively, serve theirtarget markets more successfully. However, manycustomers (18 % of our sample chose not to opt for aloyalty card) complain about this fact and privacyinvading matter that companies get their hands on suchpersonal information while many customers (25 % ofour sample who chose not to opt for a loyalty card) statethat they dislike being contacted for offers.
Amongst the sample of customers who own oneor more than one loyalty cards, 40% confessedthat having a loyalty card of a particular storedoes not prevent them from going to otherretailers as they feel they benefit more byvisiting a variety of stores and utilizing a rangeof cards while 33% of them either don’t usethem or use them very rarely.
Amongst the sample of customers who ownone or more than one loyalty cards confessthat their frequency of purchase at aparticular store has not changed after thestore has issued a loyalty card.
The most attractive benefit that the customerseeks from a loyalty card is special discount oncardholder’s special days. This shows privilegeseeking as well as discount seeking behavior ofthe customer. This requirement of the customercould be fulfilled by giving more discounts or bydeveloping healthy and long term relationshipwith the customer.
Loyalty cards looks like an important component in awhole program of efforts designed to increase customercommitment to a store. They represent the opportunity tobuild long term customer loyalty. But they are not the solefactor in a customer’s store loyalty development. Resultsof this study show that customers also focus heavily on theavailability of a wide variety of products, salespeople’spositive attitudes and ease of transportation as their topfactors for developing store loyalty. Therefore, companieshave to take the whole package into consideration. Theymust aim to build a connected network ofcustomers, partners and vendors, enabled bytechnology, all working towards profitable, and mutuallybeneficial relationships.
Hence we suggest the companies to bury the loyaltycards for a while and relook at how they can getcustomer loyalty by some sustainable means.
LIMITATIONS•Marketing Research (MR) is not an exact science though it uses the techniques of science.Thus, the results and conclusions drawn upon are not very accurate.•The research was carried out on consumers, who are humans. Humans have a tendency tobehave artificially when they know that they are being observed. Thus, the consumers andrespondents upon whom the research is carried behave artificially when they are aware that theirattitudes, beliefs, views, etc are being observed.•We faced time constraint during our research, as we had only 8 weeks for the completion of theresearch.•Money constraints: We haven’t had the proficiency to carry wide surveys for collectingprimary data, and hence were not also able to hire specialized market experts and researchagencies to collect primary data. Thus, we had to go for obtaining secondary data that is cheaperto obtain.•Sample size: Due to time and money constraint, we had to go for convenient sampling.•The research was conducted in open marketplace where numerous variables act on researchsettings.
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